Business is about taking risk, but risks need to be measured or at least estimated. Every time a business brings a product to market, these risks must be evaluated.

Creating a product or maintaining equipment is actually about our ability to manage risk. Various risks need to be identified and carefully considered. The most important of these from a reliability standpoint are safety risk, technical risk, schedule risk, and financial risk.

SAFETY RISK

Product safety is always of paramount importance. The use of a product, whether it is driving a car, riding in an airplane, or applying a surgical device, entails some risk of loss for someone of something that is valued.

This loss or harm may be valued differently by different stakeholders in the process of using the product. The loss or harm may involve delay, injury, property damage, or degradation of the environment, to name a few examples.

Safety risk has two independent components: the probability of the harm and the severity of the harm. A product may be unreliable (i.e., failure is quite likely) but, when it fails, the only harm is delay or a loss of time.

Everyone can recall frustrations using a computer. The most reliable product (where failure is unlikely), such as a nuclear power plant or a commercial airplane, could likely cause a catastrophe when it fails.

TECHNICAL RISK

It has been said that a new product idea is born when a new technical capability is recognized as being able to fill an existing customer need.

During new product development, one of the risks is that a new technology will not work well enough in the application. The new technology may not be quite capable enough, fast enough, or provide long enough battery life. Attempts to close those gaps to mitigate the technical risk may compromise reliability.

SCHEDULE RISK

Schedule risk is another concern. Major schedule delays in new product development have resulted from new technology not yet being ready to enter the market.

Optimistic scheduling of new product development results in large investments being made earlier than necessary for personnel, tooling, manufacturing and service facilities, sales training, advertising, and so on.

FINANCIAL RISK

Of course, business is also about making money, so financial risk ties in with all these other risks and might well be considered the most important (certainly by management). Delays in new product development do three things:

• They cause more direct cost in salaries and use of facilities,
• they allow competitors to establish a presence in the market,
• and they divert resources from the development of other products.

If the future time when the new product will be obsolete is fixed by competitors or emerging technology, delays in introducing the new product reduce its total potential sales. This reduction takes the form of slicing out the middle of the product’s life when volumes and profits are highest.

Delays cause more outlay in development and reduce the potential for return on that investment.

Financial risk can result from having unrealistic market projections on sales volumes. Shipments may not reach the level anticipated, perhaps wasting investment in production capacity.

An unreliable product may cost more in warranty than the profit available in a competitive market. Repairable products may fail again and again with no limit on financial losses. A bad reputation for reliability may have severe repercussions on market share.

An unsafe product can result in product liability lawsuits and resultant legal costs and jury awards. The negative publicity can tarnish the reputation of an entire company’s brand, spreading widespread financial loss.

Bio:

Fred Schenkelberg is an experienced reliability engineering and management consultant with his firm FMS Reliability. His passion is working with teams to create cost-effective reliability programs that solve problems, create durable and reliable products, increase customer satisfaction, and reduce warranty costs. If you enjoyed this articles consider subscribing to the ongoing series Musings on Reliability and Maintenance Topics.